All posts tagged french election

Nobody asked them, but European markets have cast their protest vote, too.

After weekend elections in France and Greece that will mark a change of course–how great is yet to be seen–for the euro crisis, markets opened Monday with a thud. In France, Socialist challenger François Hollande beat President Nicolas Sarkozy, as expected. In Greece, a smorgasbord of parties won parliamentary seats, leaving no one with a clear mandate.

The story told by the tape is clear: Investors this morning see a larger risk of a euro breakup. Stock markets across the continent are down (the U.K. has the good sense to have a bank holiday today, and London is closed), reflecting a broad flight out of riskier assets. Our old friend the safe-haven German bund is up, and the dangerous duo of Italian and Spanish bonds are down.

That’s the classic risk-off trade we’ve seen countless times during the ebb and flow of the debt crisis. But we’ve also seen a strong reaction in the otherwise steady euro. It dipped below $1.30 in Asian trading and is now fluttering around that mark. The euro had been above $1.31 all week, and it last saw $1.30 in January.

The euro’s weakness is not a good sign. Much of the recent crisis-related flow has been out of some euro assets (Spanish and Italian) and into others (German). That’s still happening to some degree–German bonds are stronger–but the weaker euro implies that there’s movement out of euro assets altogether.

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